The novel coronavirus (“COVID-19”) pandemic has caused significant personal and business disruptions to virtually every aspect of life. Businesses are being challenged by the financial markets, supply chain threats, cybersecurity threats, plus questions regarding future growth, sustainability, and expansion. Understandably, the immediate focus for the business community is on the safety and welfare of employees, as well as economic survival. Notwithstanding these well-founded concerns, companies, and in particular their environmental, health, and safety (“EHS”) staffs, need to be prepared to address employees’ concerns regarding issues related to the company’s COVID-19 response and management, as well as to respond to any environmental or safety incidents, which may involve state environmental agencies or the U.S. Environmental Protection Agency (“EPA”). Simply put, companies involved in environmentally sensitive operations such as refineries, mining, chemical facilities, oil and gas production, water treatment facilities, or plant manufacturing operations, etc., need to remember that EHS personnel must still ensure compliance with EHS laws and requirements during a period when they may find themselves inundated with new COVID-19 responsibilities, or with very little staff to support their company’s EHS regulatory obligations. Below are tips for companies and their EHS managers who might find themselves operating under a “trial by fire” and with limited capacity, or who may find that they have more time on their hands until the economy bounces back from the current disruption. Continue reading “EHS Management During the Coronavirus Pandemic: Proactive Measures”
As the world’s attention turns increasingly (and almost exclusively) to the spread of COVID-19 (the coronavirus), we want to take this opportunity to highlight two important federal agency responses from the U.S. Occupational Safety and Health Administration (“OSHA”) and the U.S. Environmental Protection Agency (“EPA”). The responses from the Center for Disease Control (“CDC”) and World Health Organization (“WHO”) have received the bulk of public attention to date, and for good reason. Just this week, the WHO declared the outbreak a pandemic with nearly 125,000 cases reported across 118 countries and territories. WHO has shipped supplies and protective equipment to 57 countries and is preparing to ship to another 28 countries. WHO has published an R&D roadmap and comprehensive technical guidance. WHO has also pledged more than $440 million (U.S.) to WHO’s Strategic Preparedness and Response Plan.
Here at home, the CDC has likewise been operating in overdrive to reduce the spread and impact of the virus. The CDC has issued multiple clinical guidance documents for healthcare professionals in addition to travel guidance related to COVID-19. The CDC established a COVID-19 Incident Management System on January 7, 2020, and activated its Emergency Operations Center on January 21. Multidisciplinary teams have been deployed to support state and local health departments. CDC also developed diagnostic testing to track and confirm COVID-19 cases and testing kits from commercial labs are expected soon. The CDC has also issued well-publicized recommendations for the public to follow.
In addition to these sweeping responses from the WHO and CDC, OSHA and EPA have been busy preparing and executing their response to this pandemic. While some employers may be able to provide significant flexibility to employees, allowing them to work from home, other employers will need to keep employees onsite, and will need to ensure the safety of their workforce. Other employers, which may manage medical wastes, will need to exercise additional precautions in ensuring that infectious wastes potentially contaminated with COVID-19 are managed in accordance with relevant state and EPA medical waste requirements. Below are the highlights from each agency. Continue reading “Coronavirus: OSHA’s and EPA’s Response”
The Federal Energy Regulatory Commission issued an Order Assessing Civil Penalties, imposing approximately $1.5 million in civil penalties on Vitol Inc. and one million dollars in penalties on a Vitol trader. In a departure from prior cases, the Commission assessed penalties well below Enforcement Staff’s recommended six-million-dollar penalty for the company, in light of the individual trader’s significant involvement in the alleged scheme. The next step for Respondents wishing to challenge the Order will be de novo review in federal district court.
On October 25, 2019, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued an Order Assessing Civil Penalties (“Order”), imposing civil penalties of $1,515,738 against Vitol Inc. (“Vitol”) and one million dollars against Federico Corteggiano, a Vitol trader, in connection with an alleged market manipulation scheme in the California Independent System Operator Corporation’s (“CAISO”) markets.[i] Additionally, the Commission ordered Vitol to disgorge unjust profits, plus interest, of $1,227,143.
As we have previously discussed, the Commission began this proceeding by issuing an Order to Show Cause and Notice of Proposed Penalty to Respondents on July 10, 2019. In that order, the Commission directed Vitol and Corteggiano to show cause why they should not be assessed civil penalties of six million dollars and $800,000, respectively, and why Vitol should not be required to disgorge unjust profits of $1,227,143, plus interest. Respondents elected to have the Commission assess an immediate penalty if it finds a violation and then proceed with de novo review before a federal district court.
In the instant Order, the Commission found that Vitol and Corteggiano (collectively, “Respondents”) violated the anti-manipulation prohibitions in the Federal Power Act (“FPA”) and FERC’s Anti-Manipulation Rule[ii] through a cross-market scheme in which Respondents sold power at a loss in the CAISO wholesale electric market to avoid greater losses in Vitol’s positions in a separate financial product—congestion revenue rights (“CRRs”).[iii]
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[i] Vitol Inc., Order Assessing Civil Penalties, 169 FERC ¶ 61,070 (2019).
[ii] FPA § 222 (2012); 18 C.F.R. § 1c.2 (2019).
[iii] Specifically, the Commission found Respondents intentionally engaged in fraudulent physical energy imports during the period October 28-November 1, 2013, at the Cascade intertie to relieve congestion at Cragview, which in turn lowered the Cragview locational marginal price (“LMP”) and economically benefitted Vitol’s CRRs sourced at that location. Order at P 34.
At the outset of 2019, Pennsylvania Governor Tom Wolf set a goal for Pennsylvania to significantly reduce greenhouse gas emissions. Now, Governor Wolf plans to achieve that goal by taking the bold step to establish a carbon dioxide cap-and-trade program through executive action. On October 3, 2019, Governor Wolf issued an Executive Order directing the Pennsylvania Department of Environmental Protection (“DEP”) to begin the process for Pennsylvania to join the Regional Greenhouse Gas Initiative (“RGGI”, pronounced “Reggie”). RGGI is a market-based cap-and-trade program implemented by several Northeast states to reduce power sector CO2 emissions. Governor Wolf’s Executive Order made national headlines because of the potential implications of Pennsylvania—a state known for its coal and natural gas reserves—joining RGGI. But this news is only the start of a long regulatory process, one that could realistically take years to become implemented. At this stage, Pennsylvania fossil-fuel power generators should familiarize themselves with RGGI’s requirements and procedures as well as the rulemaking process by which the Commonwealth might join RGGI.
The RGGI Program
RGGI is a collective effort by its member states to create a Northeast regional cap-and-trade program affecting fossil-fuel power plants greater than 25 megawatts. Member states—currently Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont, with New Jersey in the process of rejoining—each enact statutory or regulatory programs in their respective states that are RGGI compliant. CO2 emitting power plants then participate in RGGI regional auctions to purchase CO2 emission allowances for usage, or to sell on secondary markets. RGGI caps the total amount of CO2 emission allowances, measured in tons of carbon, with the most recent cap being 80.2 MM-tons. Beginning in 2021, the cap will be set at 75.1 MM-tons, which will then be reduced by 30 percent between 2020 and 2030. Proceeds from the auctions are distributed to the respective states for investment in programs to further reduce CO2 emissions, such as energy efficiency, renewable energy, or consumer benefit programs. Continue reading “Pennsylvania Plans to Join the RGGI CO2 Cap-and-Trade Program”
On August 16, 2019, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) issued an order granting in part and denying in part requests for further clarification of its reform of Large Generator Interconnection Agreements (“LGIA”) and Procedures (“LGIP”). Order No. 845-B affirms FERC’s prior findings that the expansion of an interconnection customer’s option to build does not impede transmission owners’ ability to recover a return of and on network upgrades. The order also reiterates FERC’s determination not to revise the pro forma LGIA’s indemnity provisions.
Order No. 845—FERC’s Final Rule revising the pro forma LGIP and LGIA—made various reforms to “improve certainty for interconnection customers, promote more informed interconnection decisions, and enhance the interconnection process.” Among these changes, the Commission expanded interconnection customers’ ability to exercise the option to build transmission providers’ interconnection facilities and standalone network upgrades beyond instances where the transmission provider is unable to meet the interconnection customer’s preferred construction timeline.
A subsequent decision, Order No. 845-A, among other things, rejected arguments that the option build revisions contradicted the United States Court of Appeals for the District of Columbia Circuit’s (“D.C. Circuit”) decision in Ameren Services Co. v. FERC. According to the Commission, “Ameren stands for the principle that the Commission cannot prohibit a transmission owner from earning a return of, and on, the cost of its network upgrades.” In that case, the D.C. Circuit vacated FERC’s orders requiring the Midcontinent Independent System Operator, Inc. (“MISO”) to remove an option under its tariff allowing transmission owners to unilaterally elect to initially fund network upgrades and to thereafter recover the interconnection customer’s portion of the cost burden through periodic network upgrade charges that included a return on the capital investment (i.e., the “transmission owner initial funding option”). Although the Commission initially found the transmission owner initial funding option unjust and unreasonable, the D. C. Circuit remanded the orders directing the Commission to “explain how investors could be expected to underwrite the prospect of potentially large non-profit appendages with no compensatory incremental return.” The Commission reinstated the transmission-owner initial funding option on remand.
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Recently, FERC issued an Order to Show Cause why Vitol Inc. and its co-director of financial transmission rights trading should not be found to have engaged in market manipulation by selling physical power in CAISO at a loss to eliminate expected losses on Vitol’s Congestion Revenue Rights. Within 30 days of the date of the Order, Respondents must show cause why they should not be found to have committed market manipulation, pay civil penalties, and disgorgement, as well as make an election under FPA § 31(d)(1) whether to proceed before an Administrative Law Judge or opt to have FERC assess a penalty and then proceed with de novo review by a federal district court.
On July 10, 2019, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued an Order to Show Cause and Notice of Proposed Penalty to Vitol Inc. (“Vitol”) and Vitol’s co-head of financial transmission rights (“FTR”) trading, Federico Corteggiano (“Corteggiano”), (together, “Respondents”), directing the Respondents to show cause why they should not be found to have violated the anti-manipulation provisions of the Federal Power Act (“FPA”) and the Commission’s regulations.
The Order arises from allegations by FERC’s Office of Enforcement (“Enforcement”) that Respondents engaged in a “cross-product market manipulation scheme” by selling physical power at a loss in the California Independent System Operator (“CAISO”) day-ahead market to avoid even greater losses on their positions in a separate financial product—congestion revenue rights (“CRRs”). Enforcement’s factual allegations and legal analysis, resulting from an investigation into Respondents’ trading, are detailed in the Enforcement Staff Report and Recommendation included with the Order. The investigation was prompted by a report from a CAISO market participant regarding Vitol’s activity.
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Last month, the Supreme Court in Kisor v. Wilkie, 139 S.Ct. 2400 (2019) upheld what is known in administrative law as Auer deference: the age-old principle that a court should defer to an agency when the agency is interpreting its own ambiguous language in a regulation. See Auer v. Robbins, 519 U.S. 452 (1997); see also Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945). Deference to an agency’s regulatory interpretation has long been a challenge to industry and the broader regulated community. In any situation where an agency is on the other side of an issue—whether negotiations or a lawsuit—the agencies always had the upper hand when regulatory language was ambiguous. And this interpretation could often be the deciding factor between a party being in compliance with or in violation of a regulation.
But, with the Kisor decision the Court attempted to respect decades of precedent in this area yet rein in the frequency of Auer deference’s use and assuage naysayers by establishing clear standards for when a court should defer to an agency’s interpretation of its own regulations. Continue reading “Leveling the Playing Field against Federal Agency Regulatory Interpretation: The Supreme Court’s Kisor Decision and the U.S. Attorney General’s 2018 Memorandum”
The Council on Environmental Quality has published Draft Guidance to federal agencies to evaluate the effects of greenhouse gas emissions under the National Environmental Policy Act. The Draft Guidance is largely consistent with the approach taken by the Federal Energy Regulatory Commission in recent natural gas infrastructure orders. Comments are due on July 26, 2019.
On June 26, 2019, the Council on Environmental Quality (“CEQ”) published new draft guidance to clarify the scope of review federal agencies should undertake when considering the effects of greenhouse gas (“GHG”) emissions under the National Environmental Policy Act (“NEPA”) and related regulations.1 The Draft Guidance is intended to replace CEQ’s prior GHG-related guidance, which was adopted in 2016 and later rescinded pursuant to an Executive Order in 2017.2 The Draft Guidance is largely consistent with the approach taken by the Federal Energy Regulatory Commission (“FERC”) in recent natural gas infrastructure orders.
CEQ’s Draft Guidance
NEPA is a procedural statute that requires federal agencies to analyze the environmental impacts of any major federal action significantly affecting the quality of the human environment.3 Although NEPA does not mandate any particular substantive outcomes, it requires an agency to consider the direct and reasonably foreseeable indirect effects of a proposed action.4
The Draft Guidance states that “[a] projection of a proposed action’s direct and reasonably foreseeable indirect GHG emissions may be used as a proxy for assessing potential climate effects.”5 While direct effects are caused by an action and occur at the same time or place, indirect effects are caused by the action and are later in time or farther removed in distance but are still reasonably foreseeable. Thus, the proposed guidance suggests that quantification of emissions is sufficient to meet an agency’s obligation to assess effects of emissions.
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With the May 1 order, the Commission reaffirms its view that it has concurrent jurisdiction over debtors’ efforts to reject their FERC-jurisdictional contracts in bankruptcy. Further developments in judicial proceedings in the Sixth and Ninth Circuits are expected.
On May 1, 2019, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) denied Pacific Gas and Electric Company’s (“PG&E”) requests for rehearing of two Commission orders asserting concurrent jurisdiction with bankruptcy courts over the disposition of wholesale power contracts PG&E seeks to reject through bankruptcy.1
In its Rehearing Order, the Commission acknowledged a circuit split regarding the relative authorities of the Commission under the Federal Power Act (“FPA”) and the bankruptcy courts under the Bankruptcy Code as they relate to the review and disposition of FERC-jurisdictional contracts in bankruptcy proceedings. However, the Commission affirmed its prior holdings that that “the way to give effect to both the FPA and the Bankruptcy Code is for a party to a Commission-jurisdictional wholesale power contract to obtain approval from both the Commission and the bankruptcy court to modify the filed rate and reject the contract, respectively.”2 Continue reading “In PG&E Bankruptcy, FERC Reasserts Concurrent Jurisdiction over the Disposition of Wholesale Power Contracts”
The Commission’s recent order upholds the Form No. 501-G filing requirement, which was designed to determine whether pipelines are over-recovering on their cost of service in light of recent federal income tax rate and policy changes. Thus far, the Commission has initiated investigations into the rates of six pipelines pursuant to its authority under section 5 of the Natural Gas Act. These proceedings are ongoing.
On April 18, 2019, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) issued an order (“Order No. 849-A”)1 denying requests for rehearing of its final rule on federal income tax rates for jurisdictional natural gas pipelines (“Order No. 849”).2 Order No. 849 adopted procedures for determining whether pipelines may be collecting unjust and unreasonable rates in light of income tax reductions established by the Tax Cuts and Jobs Act and the Commission’s revised tax allowance policy following the United Airlines, Inc. v. FERC decision.3 These procedures included a requirement that certain interstate natural gas pipelines file a FERC Form No. 501-G to estimate cost of service reductions and changes in returns on equity (“ROE”) resulting from the income tax changes. Continue reading “FERC Reaffirms Its Final Rule on Rate Changes Relating to Federal Income Tax Rates for Natural Gas Pipelines”